ChrisDieterich

CorrieDreibusch

RBC Wealth Management and Raymond James Financial Inc. have set limits on how much new business its advisers can conduct with F-Squared, according to people familiar with the policies. Wells Fargo Advisors has put the firm on “watch,” essentially a caution to advisers who either have invested or are considering investing clients’ money with the firm, people familiar with the matter say.

F-Squared, which oversees $27.7 billion, said in a filing submitted Friday that it had received a so-called Wells notice from the Securities and Exchange Commission indicating the commission is considering bringing a civil case against the company. The SEC notice isn’t a formal allegation of wrongdoing and gives the company a chance to respond.

The developments at F-Squared could threaten to slow expansion at one of the biggest firms in a fast-growing corner of the market. F-Squared is the biggest firm in the increasingly popular business of selling portfolios built out of exchange-traded funds, which are baskets of stocks and trade throughout the day. Their popularity has surged as investors demand access to liquid, low-cost, passive investments that give access to specific slices of the market. F-Squared’s strategies also underpin a handful of popular mutual funds sold by Virtus Investment Partners Inc. of Hartford, Conn. A spokesman for Virtus didn’t respond to requests seeking comment.

F-Squared is the largest of the ETF-managed-portfolio strategists, a niche market that has grown in popularity among advisers as a destination for individual investors’ money. This year alone, the firm’s assets have surged 50%.

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